The 72 Hour Cancellation Laws on Mortgages

by Bob Haring

When you buy a home using a mortgage loan, you'll have a closing day and a funding day. The closing day is when you sign all the papers. The funding day is when the money is actually transferred from the buyer, usually a lender, to the seller. On an original mortgage, closing and funding usually happen the same day, but on some mortgages you have three days to back out. This is called a rescission period.

Rescission Mortgages

You must be told before you sign the papers whether you have a three-day rescission period. This generally applies to refinanced mortgages, home-equity loans or home-equity lines of credit. It does not apply to a loan to buy a house or a refinance with the same lender under basically the same terms with no increased funding.

Time Defined

Your three-day rescission period starts at midnight the day after loan documents are signed and ends three business days later. That includes Saturdays, but not Sundays or holidays. If you sign on Thursday, then Friday, Saturday and Monday are rescission days and your time period expires at midnight so your loan funds on Tuesday. If Monday is a holiday, everything shifts by a day.

Rescind in Writing

You have to notify the lender in writing if you want to rescind. This has to be delivered to the lender's place of business and must be done within the rescission period. Rescinding entitles you to a refund of any money you put up or fees you paid during the closing. The lender has 20 days to refund money.

Onlly on Primary Residence

You only have a right of rescission when you're getting a loan secured by your primary residence. You won't get this with a second home, a vacation property or an investment, like a rental house. If you get a construction loan to build a house, then a mortgage to pay for that house, neither loan is subject to rescission because both loans are considered original purchase.

Resources

About the Author

Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.